Week Adjourned: 12.30.11

A weekly wrap up of class action lawsuits and settlements for the week ending December 30, 2011.

Top Class Actions

Neiman-Marcus Class Action Filed Over $1.50. That’s one dollar fifty cents, folks. This is interesting–and I have to admit I’d never thought about ATM fees in department stores. But this woman has–Marilyn Frey, from Sherman, Texas. She has filed a consumer fraud class action against Neiman-Marcus claiming unfair business practices over its charging $1.50 ATM fees at ATM terminals in their stores, without posting the fees. Umm. Ok.

The lawsuit, brought individually and on behalf of others similarly situated, claims that Frey made a withdrawal at an ATM on October 11, 2011, which is operated by Neiman-Marcus in their store, and was charged a “terminal fee” of $1.50 in connection with the transaction. The lawsuit claims that the fee is in violation of the Electronic Fund Transfer Act, which requires a notice posted on or at the ATM regarding the fee that would be charged for use. Well, this could certainly open up a can of worms…all this for $1.50.

Top Settlements

A couple of biggies this week…

AIG Low-balling Workers’ Comp Claims. First up—American International Group Inc (AIG)—they received final approval from a federal judge to pay $450 million as settlement of the AIG class-action lawsuit brought by a group of other insurers alleging underreporting of workers compensation premiums.

The settlement is supported by AIG and Ace Ina Holdings Inc., Auto-Owners Insurance Co., Companion Property & Casualty Insurance Co., Firstcomp Insurance Co., Hartford Financial Services Group Inc., Technology Insurance Co. and Travelers Indemnity Co. Liberty Mutual Group’s two subsidiaries, Ohio Casualty and Safeco, had opposed the settlement. In August, the U.S. Court of Appeals for the Seventh Circuit denied Liberty Mutual’s request to appeal the proposed $450 million settlement while the case is still ongoing. Liberty Mutual could still file an appeal down the road, and can still drop out of the settlement class to pursue a case against AIG on its own.

The lawsuit stems from allegations that AIG intentionally underestimated its workers’ comp premiums to avoid premium taxes and substantial residual market charges before 1996. In some states, from the mid-1980s to the mid-1990s, the residual market losses were greater than the residual market and voluntary market premium combined, so the more voluntary premium a company wrote, the more it had to pay out to cover its share of the residual market losses. That, allegedly, gave companies an incentive to under-report workers’ comp claims. Got it? Hey—fraud is fraud…

Look Sharp? Next up…A $538.6 million settlement has been agreed between Sharp Corp., Samsung Electronics Co. (005930) and five other makers of liquid crystal display panels which, if approved, would end claims that the companies fixed prices on the panels used in computers and televisions. The attorney generals of eight states, including California, Florida and New York are part of the settlement agreements with the manufacturers.

In a nutshell—the antitrust lawsuit alleged that the companies fixed prices of thin-film liquid crystal display panels, between 1999 and 2006, which effectively increased the prices for purchasers of devices such as televisions, notebook computers and monitors.

How is a consumer supposed to know this stuff? Oh right, we’re not. All things considered maybe the term “trust” should be stricken from terminology relating to the free market… just a thought…

Apparently, this settlement will see about $501 million made available for partial refunds to consumers and about $37 million made available for compensation to governments and other public entities for damages.

Ok—That’s a wrap for this year. Happy New Year and all that jazz. See you in 2012!

Week Adjourned: 12.23.11

A weekly wrap of the latest class action lawsuits and settlements, December 23, 2011

Top Class Actions

Another Corny Lawsuit? Ummm—you decide. A consumer fraud lawsuit was filed this week—testing the boundaries of food labeling vis-a-vis PepsiCo’s snacks business, Frito-Lay. The issue? Frito-lay is misleading consumers by making claims that its products, which contain genetically modified corn and vegetable oils, are all-natural, according to the lawsuit.  (All natural corn=all natural chips? Really?)

Specifically, the lawsuit claims that by labeling some of its Tostitos and SunChips products as “made with all-natural ingredients” Frito-Lay is misleading consumers because genetically modified corn and vegetable oils are also present in the product. “The reasonable consumer assumes that seeds created by swapping genetic material across species to exhibit traits not naturally theirs are not ‘all natural’,” the claim states.

The claimant is pursuing the case on the basis of a violation of California and federal laws relating to unfair and fraudulent claims. I’m still struggling with the thought of any of this type of “food” being ok on any level—never mind whether or not it’s genetically modified. Bah humbug!

Top Settlements

Diamonds are Forever. So’s the De Beers Price Fixing Settlement now. The U.S. Court of Appeals for the Third Circuit has issued an opinion today upholding the settlement in the antitrust class action litigation against the South African company De Beers, the world’s largest diamond supplier, for allegedly conspiring to monopolize the sale of rough diamonds.

The appellate court affirmed an order by U.S. District Judge Stanley R. Chesler of the District of New Jersey that approved a settlement under which De Beers agreed to pay $295 million to U.S. jewelry makers, retailers, and consumers who purchased diamonds and diamond jewelry beginning in 1994.

The settlement also prevents De Beers from continuing its illegal business practices and requires De Beers to submit to the jurisdiction of the Court to enforce the settlement. Ouch! That’s a wee bit more than a wrist slap —but hey—that tennis bracelet sure looks good…

Talk about Soaring Gas Prices… More price fixing—this time in the stock market (now there’s a surprise)—and this time the guilty party is Amaranth Advisors LLC. They got hit with a $77.1 million settlement in a securities lawsuit brought by traders who allege the hedge fund manipulated the natural gas market. Whoa Nelly!

According to Businessweek, Amaranth collapsed in 2006 after losing $6.6 billion on natural gas trades. In August 2009, the Commodity Futures Trading Commission announced that Amaranth paid $7.5 million to settle market manipulation allegations however, in their lawsuit, the traders presented an expert who estimated damages at $3.5 billion.

Then, in April of this year, the Federal Energy Regulatory Commission issued a $30 million civil penalty against Brian Hunter, an Amaranth trader accused of manipulating the natural gas market in 2006.

FYI—the settlement isn’t final yet—a hearing on final approval of the class-action, or group, accord is reportedly scheduled for March 27 and, if approved, could pave the way for investor reimbursement.

Ok—That’s a wrap for this week. Merry Christmas—Happy Hanukkah—and Season’s Greetings—have a wonderful holiday everyone…

Week Adjourned: 12.17.11

A wrap of the top class action lawsuits and settlements for the week ending December 17, 2011.

Top Class Actions

What Happened to that ‘Good Will Toward Men’ Thing? ‘Tis the season–and this thing called good will towards men apparently hasn’t caught on yet–in some parts. Case-in-point–Capital One. They’re facing a class action over allegations that they illegally obtain background checks on folks applying for jobs with the company. What’s in your wallet indeed!

The lawsuit was filed on behalf of Plaintiff Kevin Smith and seeks to represent a class of all Capital One employees and job applicants for the past three years.

Essentially, the lawsuit accuses Capital One of violating the Fair Credit Reporting Act (“the Act”) Act in a two ways. First, the lawsuit alleges that Capital One’s authorization form is flawed. The law imposes strict formatting requirements on companies who do background checks. The lawsuit alleges that by burying its background check authorization in a job application, including extraneous information, Capital One violated the law. On this claim, Capital One may be liable to all employees and prospective employees who signed Capital One’s standard job application.

Second, the lawsuit also alleges that Capital One failed to provide copies of the reports when it used them to take adverse employment actions, such as refusing to hire an applicant, refusing to promote an employee or terminating an employee. This practice also violates the Act, which requires companies to provide employees with copies of their background checks.

The lawsuit is potentially valuable to class members. Employees and prospective employees may be entitled to statutory damages of up to $1,000 for each violation. “Based on our understanding of Capital One’s practices, everyone who has applied or worked for Capital One in the past three years should be eligible to receive statutory damages if our lawsuit succeeds,” attorneys for the plaintiff(s) state.

Next up–Apple. All I have to say about this is Really? Here’s the skinny…

Cheap to the (Apple) Core? The uber cool icon of new technologies for the 21st century has been hit with an employment class action lawsuit. The suit alleges that Apple devised an illegal scheme of classifying at-home call center employees as independent contractors in order to avoid paying Apple’s share of payroll taxes and other business related expenses through the use of a Yellow Dog Contract.

According to the lawsuit, Apple “hires workers to answer calls from its customers in regard to billing questions and technical support” but has devised an unlawful scheme of classifying the employees as independent contractors in order to avoid paying for regular and overtime hours worked as well as the “the cost of the employer’s share of tax payments to the federal and state governments for income taxes, social security taxes, medicare insurance, unemployment insurance and payments for workers’ compensation insurance.” The complaint specifically alleges that in order to avoid the payment of these costs as required by law, the at home call center employees “are required by APPLE to each form a separate Virtual Services Corporation to act as a shell corporation as part of the scheme to insulate APPLE from APPLE’s liability for APPLE’s Business Related Expenses.” The class action lawsuit against Apple refers to these agreements between Apple and the employees as “Yellow Dog Contracts” that violate not only employment laws, but also fundamental public policy.

Top Settlements

A Fee-for-All at Walmart? Walmart has agreed to a $13.5 settlement of a securities class action this week. The lawsuit was brought by employee Jeremy Braden, and others, who alleged that the retail giant, together with Bank of America’s Merrill Lynch unit, passed along “unreasonably high fees and expenses” to its 2 million workers who had 401(k) plans. As with many 401(k) plans, Walmart’s contained a mixture of mutual funds representing investments in the bond and stock markets. The costs of managing those funds were passed along to employees.

According to a report in the AARP Bulletin the Walmart “settlement is a legal landmark because Walmart provides one of the largest 401(k) plans in the world and is the nation’s largest private employer, with more than $400 billion in annual sales.”

The timing is interesting in that the US Department of Labor is currently refining regulations around “fiduciary duty” and fee disclosure in 401(k) plans. And, the government is pressing for full disclosure of all fees paid to middlemen such as savings plan managers and wants stricter legal guidelines on how to provide the most prudent offerings at the lowest possible cost.

“I believe my account has experienced a loss in value, due to the reduced return on my investment in those plan investment options caused by the unreasonably high fees and expenses in those funds,” Braden stated in the lawsuit.

Under the terms of the settlement, Braden will collect $20,000. “Other employees covered by the class action suit will not receive payouts, but will benefit in the form of up to $9 million in reduced fees going forward. Lawyers for the plaintiffs will collect as much as $4 million,” AARP Bulletin reported.

Ok–That’s enough for this week. See you at the bar.

Week Adjourned: 12.9.11

A wrap-up of the week’s top class action lawsuits and lawsuit settlements, for the week ending December 9, 2011.

Top Class Actions

Seems Green Mountain may have been Roasting More Than Coffee. The company got hit with a securities class action lawsuit this week alleging it has been cooking the books.

The class action is brought against GMCR, certain of its officers and directors, and the underwriters of the Offering for violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. GMCR, based in Waterbury, Vermont, is a leader in the specialty coffee and coffee maker businesses.

FYI—GMCR produces coffee, tea and hot cocoa from its family of brands, including Tully’s Coffee(R), and manufactures the popular Keurig single-cup brewing systems that use “K-Cup” portion packs.

The lawsuit alleges that, during the Class Period, certain defendants systematically and strategically manipulated GMCR’s revenues. To do so, defendants used one of GMCR’s key fulfillment vendors, M. Block & Sons (“MBlock”), as a captive warehouse to harbor expired, excessively manufactured, or otherwise unsold product. Pursuant to the fraudulent scheme, GMCR improperly booked revenues associated with falsified sales orders for hundreds of millions of dollars in K-Cup and Keurig Brewer products, which resulted in the material overstatement of the Company’s profits, inventory, and product demand levels. GMCR also fraudulently overstated its assets in proportion to its fictitious revenues by carrying the proceeds of phantom sales as assets on its balance sheet throughout the Class Period.

On October 17, 2011, David Einhorn, a prominent activist investor, released a comprehensive report, including witness testimonials by former GMCR and MBlock employees, disclosing GMCR’s misconduct and questionable relationship with MBlock. Following the release of the report, the price of GMCR shares fell approximately 10% from its closing price of $92.09 on October 14, 2011 to close at $82.50 on October 17, 2011, the next trading day, on unusually heavy trading volume.

On October 19, 2011, after Einhorn’s presentation was more widely distributed, the price of GMCR common stock fell another 15% to close at $69.80 on October 19, 2011, on unusually heavy trading volume.

Finally, on November 9, 2011, GMCR announced disappointing earnings results and skyrocketing inventory. On this news, GMCR shares dropped 40%, from a close of $67.02 on November 9 to a close of $40.89 on November 10, 2011, on extremely heavy trading volume.

The securities lawsuit has been brought on behalf of purchasers of the common stock of Green Mountain Coffee Roasters, Inc. (“GMCR” or the “Company”) between February 2, 2011 and November 9, 2011, inclusive (the “Class Period”), including purchasers of GMCR’s common stock pursuant and/or traceable to the Company’s public offering on or around May 5, 2011 (the “Offering”).

Top Settlements

HRT Breast Cancer Settlement. This one was all over the news this week. Three women who filed lawsuits against Wyeth Pharmaceuticals and Pharmacia Upjohn alleging that their diagnoses of breast cancer were directly attributable to their use of Hormone Replacement Therapy (HRT) drugs, were awarded $72.6 million by a jury in Philadelphia hearing their consolidated lawsuit. The jury awarded $20 million to Ms. Elfont, $27.85 million to Ms. Kalenkoski and $24.75 million to Ms. Mulderig, according to the plaintiffs’ attorneys.

The three women filed individual lawsuits in July 2004 against Wyeth Pharmaceuticals and Pharmacia Upjohn, both of which have since been acquired by Pfizer.

The back story, in brief, is that Elfont, 66, had taken hormone therapy drugs for over two years before being diagnosed with breast cancer in 1997. Sixty-eight year old Kalenkoski was diagnosed with breast cancer in 2002, having taken Prempro for over four years, while Mulderig, also 68, took Premarin and Provera for 11 years before she received her breast cancer diagnosis, the PennRecord reported. It’s tragic and shocking.

According to a Bloomberg News report, Pfizer’s Wyeth and Upjohn units have lost 10 out of the 18 hormone therapy cases against them in civil court trials since 2006. Earlier this year Pfizer announced it had settled a third of the pending Prempro cases, it had set aside $772 for related claims, Bloomberg reported.

Another Bank Biggie this WeekBank of America (BofA) agreed a $315 million settlement in a securities fraud class action lawsuit that alleged the bank was misled about mortgage-backed investments sold by its Merrill Lynch unit. The settlement needs court approval in order to fly–and guess who’s making that decision? US District Judge Jed Rakoff–so all bets are off that this one get’s approved…

The Public Employees’ Retirement System of Mississippi pension fund led the lawsuit, alleging that the investments contained questionable subprime mortgages written by lenders Countrywide Financial Corp., First Franklin Financial, and IndyMac Bancorp – IndyMac went under in 2008.

Ok – That’s enough for this week. See you at the bar.

Week Adjourned: 12.2.11

A wrap-up of the latest class action lawsuits and settlements for the week ending December 2, 2011

Top Class Actions

Are your text messages being traced–by your own hand, so to speak? Ten years ago this would have been the stuff of a James Bond film. Today, sadly, it seems to be business as usual–or more accurately—if you can get away with it…

A group of consumers filed a nationwide class-action lawsuit this week, alleging that smartphone manufacturers HTC Corporation, HTC America, Inc. and Samsung Electronics Co., Ltd use software developed by Carrier IQ, Inc. (“CIQ”) that illegally intercepts incoming text messages and captures users’ key strokes—including those used to compose email and text messages or to dial numbers—without consumers’ knowledge or permission. The lawsuit asks the court to award damages under the Federal Wiretap Act, and prevent companies from including similar software in future smartphones.

The back story—in mid-November, software developer Trevor Eckhart published a video blog illustrating the operation of the CIQ software recording keystrokes, including information sent to secure websites using HTTPS security protocols used in e-commerce and other security-sensitive sites.

After Eckhart published his discovery and documents he found on CIQ’s website, CIQ accused him of copyright violations and threatened legal actions unless he capitulated to the company’s demands. The Electronic Frontier Foundation, a public-interest digital rights watchdog stepped in to defend Eckhart and CIQ later apologized to Eckhart and rescinded its demands.

According to CIQ, its software is embedded on smartphones to allow the company to collect data for the benefit of cellular carriers and device manufacturers, which is important to improving customer experience, such as logging information related to dropped calls. CIQ says its program does not log keystrokes or intercept messages and it does not store or resell the information.

The lawsuit alleges that, in reality, the program does record keystrokes and the content of messages, and could transmit the information to third parties, possibly including information sent to secure websites using HTTPS security protocols used in e-commerce and other security-sensitive sites such as banking.

The complaint was filed on behalf of four smartphone users and names smartphone manufacturers HTC and Samsung as defendants along with CIQ. The lawsuit could be amended to include other smartphone manufacturers that embed the CIQ software on their devices.

The suit, filed in the U.S. District Court for the Northern District of California, accuses the companies of violating the Federal Wiretap Act and California’s Unfair Business Practice Act. The Federal Wiretap Act prohibits the unauthorized interception or illegal use of electronic communications.

Very creepy.

Top Settlements

Could this be a Christmas Bonus? Borders Group Inc has agreed to settle an employment class action lawsuit brought by 198 former employees over Borders’ alleged violations of the Worker Adjustment Retraining and Notification (WARN) Act.

Borders, unfortunately, is in the last stages of liquidation, but has agreed to pay $240,000 as settlement to the former employees who claim they were laid off without sufficient notice, violating federal regulations. After legal fees are deducted, reports indicate that each plaintiff could receive $797. The lawsuit was filed by former employees of Borders’ Ann Arbor headquarters, led by an employee named Jared Pinsker. According to the settlement filing, the parties agreed to settle their dispute to avoid a protracted and costly legal battle.

Borders, which finished closing its stores and liquidating its inventory in September, filed for Chapter 11 bankruptcy protection in February. The company converted its case into a Chapter 11 bankruptcy liquidation in July. A U.S. bankruptcy judge in Manhattan must approve the settlement. Fingers crossed on this one.

Citigroup Settlement Update. Here’s an update on a proposed settlement we wrote about in late October, involving Citigroup and allegations of investor fraud. Judge Jed Rakoff, of the infamous New York Southern District, has rejected a proposed $285M settlement offered by Citigroup to end an civil complaint brought by the Securities & Exchange Commission (SEC) over allegations that they defrauded investors through highly risky mortgage-backed investments. The specific transaction referred by the SEC involved a $1 billion portfolio of mortgage-related investments. (Anyone seen “Margin Call”?)

According to a report by Forbes, “Rakoff is a critic of the custom that allows firms to use their pocketbook to settle charges rather than admitting guilt, and said there is a public interest in finding out the truth.” Consequently, Rakoff has scheduled a trial, for July 16, 2012. However, the SEC and Citi could bring a settlement to the table prior to that, again pending judge’s approval, which, if approved would keep the case out of court. Me thinks an example may be made here.

Ok–That’s enough for this week. See you at the bar.